New Delhi: The new income tax code that will simplify and replace the nearly five decades-old law will be introduced in Parliament in the next four months amidst indications that there may be “finetuning” of taxes but no “radical” changes in them.
Over the weekend, Finance Minister P Chidambaram has been working on drafting the code, which after being tabled in Parliament, will have to go through a process that will take quite some time before it is passed.
The Finance Minister says that the salaried class pays the maximum taxes and the honest tax-payer need not worry about any harassment. But the long wait for refunds will end once the refund banker system is extended throughout the country.
“Yes, I even worked on Saturday and Sunday. Before the end of the calendar year we will introduce it in Parliament,” he told PTI in an interview when asked if he was on course on enacting a new Income Tax Code.
He said the code would begin from a zero base and would aim at simplification of the provisions of the income tax law. It would completely replace the IT Act of 1961, he said adding he had worked over the last week-end on the subject.
It was in 1860 that the first Income Tax Act was introduced. After independence, based on Law Commission’s report, the present income tax law was enacted in September, 1961.
On the subject of taxes touching low ASEAN levels in the country, Chidambaram said for that the base must become wider and compliance must get better.
Asked about his recent statement on lowering tax levels, he said: “All I said was if compliance iimproves and tax base gets wider there is scope for reduction. And I added that we must always work on the premise that lower tax rates could nevertheless enhance revenues.”
Asked if tax-payers could expect something in the next budget, he said, “depends on what we find is the revenue picture in the first week of February.”
Asked how close the country was to the ASEAN levels of low taxation, Chidambaram said, as far as customs duty was concerned, the country was “more or less there”. As for excise, VAT and service tax, no major changes could be expected till India had a goods and services tax (GST) in place.
“So there will be some finetuning but there will no major radical changes in these taxes,” he said.
On income tax, the Finance Minister said the rates were quite reasonable and moderate. Asked if the rates could be reduced in the next two to three years,he said:“ I can’t say. The tax base must become wider and compliance must become better.”
To a query on the apparent contradiction between attempts to lower tax levels and levying of surcharge, Chidambaram said the government had not raised any surcharge except on education.
Chidambaram said, ”Only in education we have raised the surcharge for a specific purpose. You can’t in one breath say you must spend 6% of the GDP on education and also say that there is no fund for education.
“With a tax-GDP ratio of 11.8% how can you provide for education only from tax? Then, half of it will go for education. There are claims from other sectors like health and internal security.”
The Finance Minister said successive budgets have removed tax exemptions.
On complaints of delays in refunds, he said the government has already introduced the Refund Banker System (RBS) in the national capital and was in the process of extending to two more cities.
Eventually, tax-payers throughout the country will be benefitted from the scheme, he said.
“Under the RBS, the day an assessment is made, three days after that refunds will be credited. At the moment, after the assessment, it takes three months, six months and one year. We plan to cut down delays through this system,” he said.
Chidambaram said a salaried tax-payer is unlikely to have any problem with refund unless there is other income.
On tax evasion, he said only technology could be used to tackle the problem. “Honest tax-payers have nothing to worry about in this country,” he said.